Blackstone's IPO: Video Roundup

By CNBC.com Staff

Friday, 22 Jun 2007 | 6:39 PM ETCNBC.com

SHARES

Blackstone Group had a stellar debut on the New York Stock Exchange Friday: After pricing at $31 late Thursday, the stock opened up $5.45, or 17.6%, at $36.45. At the bell, Blackstone's shares closed at $35.06.

The successful offering marks the biggest U.S. IPO in five years, and could open the floodgates for other alternative investment funds to go public. But the private-equity boom is coming under growing fire in Washington, with Congress moving to increase taxes on hedge funds and private-equity firms.

CNBC followed the Blackstone IPO all day Friday. Here is a sampling of the coverage:

Boiling Public Waters

Discussing whether other private equity firms will be as eager to jump on the IPO bandwagon, given the simmering tax fight in Congress, with David Wighton, Financial Times editor; Michael Gray, Neal Gerber Eisenberg private equity fund formation expert & attorney and CNBC's Bill Griffeth

He compared CEO Michael Schwarzman and Senior Chairman Pete Peterson to Bill Gates, who likewise "founded his company and took it public. They built an institution." He believes buyout arms of Goldman Sachs and J.P. Morgan, as well as private equity giant D.E. Shaw, are likely to seek IPOs next.

But David Wighton, Financial Times' NY bureau chief, is less enthusiastic: He blamed the "atmosphere in Washington" for taking "some of the froth" of the share price. The editor pointed to Fortress Investment Group, the first U.S. private-equity firm to go public -- whose share price "has come off sharply in recent weeks," amid talk of tighter regulations and higher taxes.

Ken Fisher, chief executive of Fisher Investments, told CNBC’s “Morning Call” that private equity is in the middle of a “perfect storm” -- and he expects more IPOs like Blackstone's.

He said P/E ratios are lower in relation to interest rates than they’ve been in about 25 years. This allows a company to borrow money to buy back its shares or to take over a competitor, boosting earnings per share.

“The effect of all that is the private equity firm can do the same thing,” Fisher said Friday. “It’s an arbitrage. It’s basically free money to the private equity firm."

The strategist believes that "we’re going to see to see a lot more of these deals in the next few years until we get to the point where the interest rate – P/E ratio arbitrage potential goes away.”

Private Equity Lobby

The possibility of raising taxes on on private equity could be very dangerous, with Doug Lowenstein, Private Equity Council and CNBC's Becky Quick

Taxes Could Drive Private Equity IPOs Offshore

Douglas Lowenstein, president of the Private Equity Council, told CNBC’s “Squawk Box” that a bill pending in Congress could drive private equity offshore.

The legislation, introduced last week by Senators Max Baucus (D-Mont.) and Charles Grassley (R-Iowa), would boost the tax rate to 35% from 15% on private equity firms that go public. Lowenstein said the hike would discourage U.S. private-equity firms from going public and undermine the nation’s financial competitiveness.

But the bill would permit Blackstone to continue paying a 15% capital gains rate until 2012.

Levin on Taxes

A new bill is introduced in Congress that would raise taxes on certain investment income from 15% to an ordinary income tax rate, with U.S. Representative Sander Levin (D) MI and CNBC's Bill Griffeth

Levin and other congresspeople -- including Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee -- are sponsoring legislation that would render any income received from a partnership in compensation for services as ordinary income for tax purposes.

If the legislation passes, managers of investment partnerships ostensibly may find themselves paying bigger tax bills in some cases.

But Levin insists the bill would not stifle management initiative: "I don't think we want economic growth on the basis of unfair taxes,” Levin said. "I want to foster economic growth. It needs to be done within a structure of fairness and that's what this is all about."

CNBC Markets Reporter Dominic Chu heard about a new business out of San Francisco that was getting a lot of buzz for being able to deliver anything, as long as it's legal, for a price. He put it to the test, right here in New York.